In imperfectly competitive markets, incentives for the acquisition and dissemination of information by prices is significantly affected by strategic considerations. Since prices reveal information, firms possessing market power may choose to set prices that are either biased or not adjusted to...

This paper aims at identifying and quantifying different sources of persistency in employment adjustment. Based on a dynamic labour market model an explicit distinction is made between real and nominal (prices and wage) propagation mechanisms. The theoretical analysis provides the basis for an...

This paper analyzes the real and monetary effects of a shift in the exchange-rate policy in an economy where the private sector is uncertain about the true intentions of the government. In a finitely repeated game of incomplete information, the authors show that a shift towards a tight, fixed...

Price stability has become the predominant goal for monetary policy. Should the aim be zero inflation or could inflation be too low making it better to strive for a stable (low) positive rate of inflation? This paper analyses why inflation may interact with downward nominal rigidities so as to...

A classic result in dynamic public economics states that there is no welfare rationale for pay-as-you-go (PAYG) pensions in a dynamically-efficient neoclassical economy with exogenous labor supply. Parenthetically, a welfare justification for PAYG pensions exists if the economy is dynamically...

In this paper, we assume away standard distributional and static-efficiency arguments for public health, and instead, seek a dynamic efficiency rationale. We study a lifecycle model wherein young agents make health investments to reduce mortality risk. We identify a welfare rationale for public...

In this paper, we assume away standard distributional and static-efficiency arguments for public health, and instead, seek a dynamic efficiency rationale. We study a lifecycle model wherein young agents make health investments to reduce mortality risk. We identify a welfare rationale for public...

It is shown that nonmarket-clearing prices can persist in noncooperative Nash competition among firms when the dis semination of information depends critically on the flexibility of pr ices. The key to this explanation is that the value of the informatio n revealed by quantity signals when...

The paper develops a rigorous model of the interaction between employment, income and demand. It is shown that when agents are differently informed about the income generated in the economy, aggregate demand shocks create a Keynesian-type unemployment. Moreover, the model explains nominal...